Delta orders up to 70 Bombardier regional jets valued at US$3.3 billion

MONTREAL – Bombardier has beat out Brazilian rival Embraer in securing an order for up to 70 CRJ900 NextGen regional jets from Delta Air Lines valued at up to US$3.29 billion, while also announcing a smaller deal with an unnamed customer in China.

The Montreal-based aircraft manufacturer (TSX:BBD.B) said Thursday that Delta has placed a firm order for 40 aircraft, valued at US$1.85 billion based on current list prices.

The airline also has options for 30 more planes to be operated by Delta’s regional carriers.

The planes will be configured with 76 seats in a two-class cabin, with deliveries starting the end of next year.

The deal with the Chinese customer is for seven CRJ700 NextGen aircraft with a value of US$330 million based on current list prices and including ancillary services.

“This latest order is a great step in establishing the CRJ700 NextGen aircraft as an excellent special mission aircraft,” said Michel Bourgeois, president, specialized and amphibious aircraft, Bombardier Aerospace.

The big order comes as Delta plans to maintain the number of seats available in its regional fleet while phasing out older CRJ200 planes. It is adjusting the fleet following an agreement with pilots over scope clauses which allows feeder airlines to fly larger aircraft.

The contract was widely expected since Delta is a long-time Bombardier customer and has the world’s largest fleet of CRJs — Bombardier’s main line of jets for commercial airlines.

As well, Bombardier spokeswoman Marianella de la Barrera pointed out that the new CRJs burn 16 per cent less fuel than aircraft offered by competitors such as Embraer.

Joseph Nadol of JP Morgan had said that the market expected Bombardier to win the Delta order as Embraer faced challenges over long-term demand for its competing jets.

Even if Embraer won the Delta contract “we do not believe that this order would change the picture dramatically,” Nadol said in a note in October.

Delta Connection carriers currently fly 466 CRJ series aircraft, including 286 CRJ200s, 79 CRJ700s and 101 CRJ900s.

Delta carrier Comair became the first North American airline to fly a CRJ100 in 1993, while connection carriers Pinnacle Airlines, ExpressJet Airlines and SkyWest Airlines fly the current CRJ900.

Delta president Ed Bastien said it selected Bombardier’s CRJ900 NextGen because it is a proven cost-efficient aircraft and is the right size to satisfy agreements with pilots to add 70 more of the jetliners to its fleet.

“We have selected the CRJ aircraft for our restructuring plan based on the strength and reliability of their performance with our Delta Connection carriers over the years,” he said.

Bombardier wouldn’t say if the order would increase employment in Mirabel, Que., where the planes are assembled.

“We’re very optimistic and it’s a step in the right direction and we are monitoring the economic and market indicators closely and we’ll adjust our production accordingly,” de la Barrera said from Toronto.

She said scope relief being obtained by North American carrier is starting to assist with increasing regional aircraft sales in the market.

Bombardier has now recorded firm orders for 1,775 CRJ aircraft, including 314 CRJ900 planes and delivered 1,668 planes including 259 CRJ900s as of Sept. 30.

Excluding the Delta order, Bombardier had a backlog of 47 months of production for CRJ planes, above its target of 18 to 21 months.

The regional jets are in service with more than 60 airlines in over 50 countries around the world.

Benoit Poirier of Desjardins Capital Markets said that with 67 firm orders in the last 12 months, the company’s backlog has been increased to an estimated 107 aircraft for 2013.

Bombardier’s total backlog for both its aerospace and transportation decisions stood at a record US$58.6 billion at the end of the third quarter, including US$26.1 billion for aerospace.

“Taking into account the recent orders received from VistaJet and Delta (total firm orders valued at US$5 billion), we expect the backlog to reach a new record level of more than US$60 billion at the end of the fourth quarter, thus providing visibility on revenue,” Poirier wrote in a report.

Poirier added that he expects Indonesian carrier Garuda to place a large order for about 50 Q400 turboprops this year. Meanwhile, opportunities for regional jet orders from SkyWest and American Airlines are likely in 2013.

On the Toronto Stock Exchange, Bombardier’s shares were up eight cents, or 2.44 per cent, at $3.36 in midday trading Thursday.